Big Banks Colluded for Years on Fees

The banks colluded to increase their income from fees they charged customers.

Bank Hapoalim, Bank Leumi, Israel Discount Bank, Mizrahi Tefahot Bank and the First International Bank (Beinleumi) colluded for years in restrictive trade practices by sharing information on bank fees, Antitrust Commissioner Ronit Kan said yesterday.

The banks colluded to increase their income from fees they charged customers while at the same time they used the shared information so each could try to adjust its fees so as not to appear to be the most expensive bank in the fee rankings.

"Two main factors guided the banks in setting the levels of fees they charge the public: A policy of keeping in line with what the rest of the banks and the relative position of each of them in the ranking of fee costs published by the Bank of Israel," determined Kan.

"I expect and assume the public will sue the banks for the damage they have caused. My ruling will help the plaintiffs to pass the biggest evidentiary hurdle, to prove there was a restrictive agreement that harmed competition," said the antitrust commissioner.

"Our role is to enforce the law and to bring to the public's attention the facts and provide the public with a tool - when there is a breach of the antitrust law," she added.

The Antitrust Authority's investigation of the banks was its longest and most comprehensive probe. At the end of the investigation Kan announced she would publish a ruling that the banks violated antitrust law. The banks were given time to prepare for a hearing, during which attempts were made to reach an agreement in which the banks would pay a NIS 290 million fine - but the banks decided ultimately the amount was too large.

Yesterday's ruling can be serve as evidence in any legal action against the banks.

The Antitrust Authority said its investigation discovered the collusion between the banks started in the early 1990s and continued until the Authority started its investigation. Experts from the five largest banks would pass information on fees among themselves as a matter of routine, including info on existing fees and future plans. The information was passed on mostly via phone conversations between officials in the banks' fee departments, who were responsible for pricing and collecting the various charges and commissions.

The officials received information from each other to explain the fee structures, as the rate schedules published for customers were missing important details, and the fee officials described the schedules during the investigations as being written in "Chinese."

"Only the people who wrote them understand [them]," said a bank official. The missing information was passed between the banks, and helped the banks to keep fees in line with each other, as well as serving their strategy for the Bank of Israel's rankings.

The collusion reduced competition between the banks, in particular in terms of accounts for households and small businesses said the antitrust determination. In fact, the banks created a transparent system of fees - but transparent only between themselves. The customers were denied access to this information, and this also created a barrier blocking consumers who wanted to switch between banks. Customers lacked the basic information needed to evaluate the best bank for themselves, said Kan.

Kan ruled the collusion violated the law, but did not find the banks criminally responsible. However, the ruling can be used as evidence in civil suits for damages. The banks have 30 days to appeal the ruling before the Antitrust Tribunal.